Living away from home allowance:

A living away from home allowance (LAFHA) benefit arises as compensation from an employer to an employee for additional expenses and hardship suffered when that employee is required to live away from home for employment purposes. The living away from home allowance (LAFHA) must be paid directly by the employer to the employee.

The living away from home allowance (LAFHA) benefit has the advantage of not forming part of an employee’s PAYG tax. Rather, tax is paid by the employer as a fringe benefit.

'Additional expenses' do not include expenses that are otherwise tax deductible by the employee. Location allowances, such as “hard lying” allowances for seamen and travelling allowances (generally where the period travelled does not exceed 21 days) are not considered LAFHA but are general taxable allowances upon which the employee pays tax.

Some occupations where employees will commonly be required to live away from home include construction workers living in camps, offshore oil rig employees, marine industry employees living on ships and trainee employees living away from home in order to undergo extended training courses.

Generally, transitory and transferred workers are not considered to be living away from home but there are exceptions such as where a transfer overseas or interstate occurs with an expectation to return home and LAFHA then becomes payable.

A LAFHA benefit is not payable where an employee is not required to live away from home. An allowance may be paid but it will not be considered LAFHA and accordingly, tax will be payable by the employee, not the employer.

There are also statutory amounts for both domestic employees and expatriates living in Australia that are deductible by employers from the LAFHA to determine its taxable value. These amounts are subject to change.

To see if you are eligible for LAFHA or if you have to pay LAFHA you should contact one of our Sydney Taxation Solicitors for advice to ensure you are paid or are paying the correct amount and have claimed all eligible deductions.

To arrange an appointment, please contact our firm by telephone on (02) 9233 4048 or send an email to info@navado.com.au.

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